2025-09-13 22:02:21
Welcome to the Saturday PRO edition of How They Make Money.
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📊 Monthly reports: 200+ companies visualized.
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Today at a glance:
🎨 Adobe: AI Acceleration
🧠 Synopsys: China Headwinds
🔷 Rubrik: Fusing AI with Cyber Resilience
🐶 Chewy: Autoship Flywheel
🎮 GameStop: Profitable Surprise
FROM OUR PARTNERS
They’re a private company, but Pacaso just reserved the Nasdaq ticker “$PCSO.”
Created by a former Zillow exec who sold his first venture for $120M, Pacaso brings co-ownership to the $1.3T vacation home industry.
They’ve generated $1B+ worth of luxury home transactions across 2,000+ owners. That’s good for more than $110M in gross profits in less than 5 years.
No surprise the same firms that backed Uber and Venmo already invested in Pacaso. But you don’t have to be a Wall Street firm to invest. Pacaso is giving the same opportunity to everyday investors, and 10,000+ people have already joined them.
And you can join them today for just $2.90/share. But don’t wait too long.
Invest in Pacaso before the opportunity ends September 18.
This is a paid advertisement for Pacaso’s Regulation A offering. Please read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals.
Adobe's Q3 revenue grew 11% Y/Y to $6.0 billion ($80 million beat) while adjusted EPS landed at $5.31 ($0.13 beat), as the company delivered a rebuttal to doubts about its AI strategy.
Management raised its full-year revenue outlook by more than $100 million for the second consecutive quarter to ~$23.7 billion at the midpoint. RPO (future revenue already under contract) accelerated to 13% Y/Y (from 10% Y/Y in Q2), reaching $20.4 billion, with 67% to convert in the next 12 months. The core Digital Media segment grew 12% to $4.5 billion, while Digital Experience rose 9% to $1.5 billion.
The standout story was the tangible progress in AI monetization.
CEO Shantanu Narayen announced that “AI-influenced” ARR has now surpassed $5 billion, which is a nice soundbite, but also a bit of a stretch. More concretely, Adobe has already exceeded its full-year target for "AI-first" ARR, surpassing the $250 million goal a quarter early.
While competition from AI-native startups remains a critical threat (Canva, Figma, Midjourney, Runway, and more), this quarter’s concrete AI metrics and accelerating RPO growth provided powerful evidence that Adobe is successfully monetizing AI to accelerate revenue growth. In a notable shift from previous quarters, the results and guidance sent shares higher, suggesting that Adobe is beginning to win back investor confidence in its ability to not just defend, but expand its creative moat.
Synopsys stumbled in Q3, reporting revenue of $1.7 billion ($30 million miss) and adjusted EPS of $3.39 (a significant $0.36 miss), as geopolitical risks flagged in prior quarters materialized.
The core Design Automation business remained strong, growing 23% to $1.3 billion, driven by continued demand for AI chip design. However, this was overshadowed by a severe downturn in the Design IP segment, where revenue fell 8% Y/Y, missing estimates by over $120 million.
Management attributed the IP shortfall to a trifecta of issues: new US export restrictions disrupting business in China, challenges at a major foundry customer, and internal missteps on product roadmaps.
In response to the headwinds, Synopsys issued a disappointing Q4 profit forecast, slashed its full-year EPS guidance, and announced plans to reduce its global headcount by 10%. The quarter marks a sharp reversal, where the China risk is no longer a looming threat but a direct hit to a key business segment, forcing the company into a significant strategic pivot and restructuring despite ongoing strength in its core Electronic Design Automation (EDA) tools.
The quarter was also marked by the closing of the transformational Ansys acquisition, but it closed too late (July 17) to have a material impact on revenue.
Rubrik continued its strong momentum in Q2, posting 51% Y/Y revenue growth to $310 million ($28 million beat) and a near-breakeven adjusted loss of $0.03 per share, smashing estimates by $0.31.
Wall Street was not impressed, with shares falling nearly 20% after the print. So, what happened here?
2025-09-12 20:03:18
Welcome to the Free edition of How They Make Money.
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In case you missed it:
Not because he launched a new rocket or a buzzy AI wearable, but because Oracle, his 48-year-old enterprise software giant, started acting like NVIDIA.
Shares surged 36% after the company revealed a jaw-dropping forecast. Oracle Cloud Infrastructure (OCI) revenue is set to grow 14× in 5 years, a move that will make it the dominant force in Oracle's entire business.
Let’s review what changed and why Wall Street is so excited.
Today at a glance:
Oracle’s Q1 FY26
OCI Surge Explained
Key quotes from the call
What to watch moving forward
The $455 billion RPO shocker: RPO (future revenue from existing contracts signed) is a critical leading indicator of cloud revenue growth. It accelerated to a staggering 359% Y/Y (from 63% Y/Y in the prior quarter). Conversion from RPO to revenue primarily depends on the live data center count and power capacity.
Project Stargate was added to Oracle’s RPO for the first time. It’s a multi-billion-dollar AI infrastructure initiative to build some of the largest AI data centers in history, potentially scaling to $500 billion over four years. It involves Softbank, OpenAI, NVIDIA, MGX, and Oracle.
Cloud: Oracle's growth engine rose 28% Y/Y to $7.2 billion.
Cloud Infrastructure (IaaS) focuses on providing compute, storage, and networking services. It grew +55% Y/Y to $3.3 billion (accelerating from 49% in Q4), driven by increased adoption of OCI for high-performance workloads and multi-cloud deployments. This is where RPO is expected to convert into revenue over time.
Cloud Application (SaaS) focuses on delivering Oracle's suite of enterprise applications. It grew 11% Y/Y to $3.8 billion, driven by demand for cloud-based ERP, HCM, and CRM solutions.
The visual below makes it clear: The majority of Oracle’s revenue is no longer growing. The real magic is coming from OCI.
Income statement:
Revenue grew +12% year-over-year to $14.9 billion ($260 million miss).
☁️ Cloud grew +28% Y/Y to $7.2 billion.
🌐 Software declined by 1% Y/Y to $5.7 billion.
🖥️ Hardware grew 2% Y/Y to $0.7 billion.
💼 Services grew 7% Y/Y to $1.3 billion.
Gross margin was 67% (-3pp Y/Y).
Operating margin was 29% (-1pp Y/Y).
Non-GAAP EPS $1.47 ($0.01 miss).
Cash flow:
Operating cash flow TTM was $21.5 billion (+13% Y/Y).
Free cash flow TTM was an outflow of ($5.9) billion, impacted by a massive surge in CapEx to $27.4 billion (from $7.8 billion a year ago).
Balance sheet:
Cash and short-term investments: $11.0 billion.
Debt: $91.3 billion.
📦 Backlog shock: Oracle’s remaining performance obligations jumped on 4 multi-billion-dollar contracts across 3 customers. Conversion to revenue over time will depend on data-center capacity and power coming online.
☁️ OCI is the engine: Cloud infrastructure still represents a small share of total revenue today (22% of the top line). But growth is now expected to accelerate to 77% Y/Y in FY26 (previously 70%) to $18 billion.
🔗 Multicloud flywheel: Revenue tied to hyperscaler partners surged 1,529%, with plans to activate dozens more regions. Oracle’s database and OCI are riding the installed footprints of AWS, Azure, and Google Cloud.
⚡ Execution bottleneck: Oracle signed the contracts, but now it has to actually build the data centers with a FY26 CapEx guide of $35 billion (up from $25 billion previously). The only things holding back this mountain of cash are finding enough power and pouring enough concrete, fast.
🎯 Concentration risk: A few mega-customers, including the Stargate/OpenAI program, likely account for a large share of the surge, so any slippage of the project would slow backlog conversion.
⚖️ Heavier leverage than peers: Oracle isn’t sitting on a cash hoard like the rest of Big Tech. The company has a net debt of over $80 billion. It paid over $5 billion in dividends in the past year, despite free cash flow turning negative. That mix trims financial flexibility if the cycle wobbles.
🔮 OCI guidance got (a lot) bigger: The multi-year preview for OCI implies revenue rising to $18 billion in FY26, then $32 billion, $73 billion, $114 billion, and $144 billion over the following four years. Yes, that's a 14x from FY25 to FY30. Let’s review why.
Before we get carried away by that $455 billion backlog figure, let's be clear: RPO isn't cash in the bank. Here's how to think about it:
What RPO is: Contracted, non-cancelable future revenue not yet recognized.
Total vs. current: Current RPO converts within twelve months, while total RPO can span years, so headline RPO says little about near-term revenue.
Why RPO can mislead: A few multi-year mega-deals can swell RPO overnight, but revenue lands only as capacity is delivered and usage ramps.
One-offs vs. run-rate: Don’t annualize this quarter’s signings. Heavy contract concentration means the surge isn’t a steady cadence. That’s even more true with the massive Project Stargate.
In short, OCI revenue, utilization, and CapEx progress all offer a better compass than RPO to gauge the upcoming revenue growth and its magnitude.
The Wall Street Journal reports that OpenAI signed a $300 billion, roughly five-year compute purchase with Oracle beginning in 2027.
Oracle’s RPO rose $317 billion sequentially.
If the enforceable, non-cancelable portion of the OpenAI agreement was booked at signing—as Oracle describes RPO—Stargate likely represents the vast majority of the jump in RPO, and is therefore reflected in the OCI revenue forecast.
Management previewed a multi-year OCI ramp to $144 billion within five years. That’s the kind of epic growth we’ve seen for NVIDIA’s Data Center revenue.
For context, Oracle previously shared a goal for FY29 of $104 billion in revenue for the entire company at the Financial Analyst meeting last year. That FY29 revenue number is now likely over $160 billion based on the new OCI forecast, even assuming other segments remain flat-ish.
Management did not share an OCI revenue amount previously, so the magnitude and specificity of the plan were both noteworthy.
Oracle won't name names, but the list of suspects for these multi-billion-dollar deals is short and star-studded. Let's play detective:
OpenAI (via Project Stargate): Again, Oracle and OpenAI publicly announced a 4.5-gigawatt US expansion for Stargate on Oracle, and multiple outlets report a mega-contract underpinning capacity.
xAI: Oracle and xAI announced Grok models on OCI for training and inference in June. The scale and timing fit a multi-billion-dollar commitment.
Meta: Zuck is in the midst of an aggressive AI CapEx ramp ($66–$72 billion in 2025, with a further step-up flagged for 2026). That profile fits a multi-billion, multi-year OCI commitment
In addition, Oracle said in August it would offer Gemini models via OCI alongside the Database@Google Cloud expansion. Oracle also highlighted plans to deliver more multicloud datacenters for AWS/Azure/Google.
“Oracle has become the go-to place for AI workloads. We have signed significant cloud contracts with the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD and many others.”
The demand side is real and very concentrated. That explains the backlog spike, but it also means delivery and timing for a few mega customers will drive conversion.
“Multi-cloud database revenue […] grew 1,529% in Q1… [We have] 34 multi-cloud data centers now live […] and we will deliver another 37 for a total of 71.”
Database is the distribution engine. Embedding Oracle inside AWS, Azure, and Google Cloud broadens reach and shortens time-to-value for enterprise migrations.
“We do not own the property […] What we do own […] is the equipment […] we put in that equipment only when it's time [and are] already generating revenue right away […] I don't want to call it asset-light […] but it's asset pretty light.”
The model tilts toward rapid turns from CapEx to revenue, giving strong visibility and financial manoeuvrability.
“The AI inferencing market will be much, much larger than the AI training market.”
If Oracle’s bet on enterprise inferencing lands, mix should tilt toward higher-frequency, data-adjacent workloads, supportive for margins over time.
“Our networks move data very, very fast […] if we're twice as fast, we're half the cost.”
The pitch is simple: faster clusters lead to lower unit economics for customers. That’s the competitive wedge in GPU-heavy deals.
“With the introduction of our new AI database […] you can vectorize [all your data] and […] directly connect [...] to […] ChatGPT, Gemini, Grok, Llama […] uniquely available in the Oracle Cloud.”
Tying private enterprise data to top-tier models, without losing custody, is the stickiness play for Oracle’s database franchise.
“We have gotten the entire Oracle Cloud, the whole thing, every feature, […] into […] 3 racks, we call it Butterfly. That costs $6 million.”
A full-feature private region at a relatively low entry ticket expands the addressable market for regulated and sovereignty-sensitive workloads.
The headlines are euphoric, so the checklist should be sober.
From here, the story is less about new deals and more about conversion. How quickly can Oracle turn backlog into revenue and cash?
Can the cash keep up with Capex? Oracle is front-loading spend and burning cash near term as capex rises. The tell will be free cash flow inflecting as new data-center capacity comes online and billing starts. Heavier leverage and steady dividends mean less wiggle room than Big Tech peers, so pace matters.
Will they hit the target? Treat the five-year OCI ramp as a scoreboard. Now that the new forecast (with Stargate) is official, the downside risk is real. Utilization of new regions is the quiet metric that makes the math work. But to be clear, management appears confident that there are many more deals on the way.
How long will this cycle last? Execution now is about power, GPUs, and the cadence of embedded regions with AWS, Azure, and Google. If enterprise AI demand cools, conversion slows, and Oracle doesn’t have the same cash cushion as larger peers. The relative “asset light” approach helps soften the potential challenges.
What if the mega-customers flinch? A few massive customers (Stargate/OpenAI, xAI, and a handful of Mag7) are carrying outsized weight. Any slip in milestones, power timelines, or contract terms would delay revenue.
Bottom line: Like NVIDIA, Oracle is plugged directly into Big Tech’s arms race. Oracle is now a CapEx beneficiary, not a discretionary vendor. As long as the AI build-out lasts, OCI’s runway for exceptional growth stays open.
📊 Want to see how AMD and NVIDIA recently performed? Check out our latest monthly Earnings Visuals report.
That's it for today.
Happy investing!
Disclosure: I own AMD, AMZN, GOOG, META, and NVDA in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2025-09-09 20:03:23
Welcome to the Premium edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
Klarna is going public this week.
If you’re feeling a sense of déjà vu, you’re not alone.
Six months ago, we tore down the 300-page F-1 filing as the BNPL giant geared up for its highly anticipated IPO. The company then hit pause following the Liberation Day chaos, citing market volatility from tariffs and shifting trade policies, leaving the market waiting.
Well, the wait is over.
Shares will start trading on Wednesday under the ticker KLAR.
We have six months of new data, including results from the first half of FY25.
As one of Europe's largest fintechs and a bellwether for the 'Buy Now, Pay Later' category, Klarna's public debut is one of the most significant of the year.
Has the investment case gotten stronger or weaker?
Let's find out.
Today at a glance:
The Klarna Thesis
What the New Data Reveals
IPO Facts and Valuation
Klarna vs. Affirm vs. Block
What to Watch Next
FROM OUR PARTNERS
Austin Allison sold his first company for $120M. He later served as an executive for Zillow. But both companies reached massive valuations before regular people could invest.
“I always wished everyday investors could have shared in their early success,” Allison later said. So he built Pacaso differently.
Pacaso brings co-ownership to the $1.3T vacation home market, earning $110M+ in gross profit in under 5 years. No wonder the same early investors who backed Uber, Venmo, and eBay already invested in Pacaso.
They even reserved the Nasdaq ticker PCSO. Now, after adding 10 new international destinations, Pacaso is hitting their stride.
And unlike his previous stops, you can invest in Pacaso as a private company. But you don’t have time to waste.
Invest before Pacaso’s opportunity ends on September 18th.
This is a paid advertisement for Pacaso’s Regulation A offering. Please read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals.
If you missed our original F-1 teardown on Klarna, I strongly recommend it to get the key facts and understand how they make money.
To understand Klarna's IPO, you have to understand the two powerful narratives that surround the company. One is of a fintech giant with accelerating momentum. The other is of an unprofitable business whose fundamentals are becoming more complex.
The argument for Klarna is rooted in undeniable momentum and strategic progress:
Explosive scale: Klarna's network effect is its greatest asset. Its active consumer base has swelled to 111 million as of Q2 2025, a massive 31% jump from Q2 2024. This growth is supercharged by partnerships with retail giants like eBay and Walmart later this year, and a merchant network that has expanded 34% Y/Y to 790,000.
Accelerating growth: Q2 revenue climbed 20% Y/Y to $823 million (up from 15% Y/Y in Q1), with Gross Merchandise Volume (GMV) up 19% Y/Y to $31 billion (up from 13% Y/Y in Q1). This acceleration is particularly strong in the crucial US market, its largest by revenue and fastest-growing.
The path to "profitability": While P&L is still in the red, management is pointing to a crucial milestone: its fifth consecutive quarter of adjusted operating profit, which hit $29 million in Q2. This signals, in their view, that the underlying business model is efficient and scaling effectively.
Despite the impressive top-line growth, the risks are becoming more pronounced:
The "profit" illusion: The focus on "adjusted" profit masks a harsher reality. If we include stock-based compensation, Klarna's operating loss expanded to $46 million in Q2 2025 from $4 million a year prior. For the first half of the year, the operating loss ballooned to $136 million, a significant deterioration from the $32 million loss in H1 2024.
Rising Provisions for Losses: As Klarna pushes more into longer-term loans (higher-value items paid over 6-12 months), its "provision for credit losses" is increasing, rising to 0.56% of GMV (up from 0.42% in Q2 FY24). On the bright side, the realized losses actually declined from 0.48% to 0.45% of GMV, showing that the higher provisions are the result of accounting rules, as opposed to a sign of rising defaults. It still creates a drag on near-term profitability that complicates the financial picture.
Brutal Competition: The landscape remains a battlefield. Klarna is in a constant fight for merchant partnerships and consumer attention against well-capitalized and profitable rivals like Affirm, Afterpay (Block), and PayPal.
It's critical to focus on "Like-for-Like" (LfL) metrics, as they provide the clearest view of the core business's health.
Klarna uses it to adjust for two significant elements:
Sale of Klarna Checkout (KCO): Klarna sold KCO, its online checkout solution, to a consortium of investors on October 1, 2024. This has negatively impacted Q4 FY24’s revenue growth rate, and it will impact the first three quarters of FY25 as well.
Foreign currency (FX) fluctuations: These can create temporary tailwinds or headwinds, so it’s best to exclude them.
But we also have to dig deeper into the impact of the Fair Financing product.
2025-09-06 22:00:32
Welcome to the Saturday PRO edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
📈 Broadcom: Upgraded AI Outlook
☁️ Zscaler: ARR Tops $3 Billion
🎨 Figma: Back To Reality
🖥️ HPE: Juniper Integration
🧘🏻 Lululemon: US Consumer Fatigue
🌐 Samsara: Enterprise Momentum
✍️ DocuSign: AI Drives a Rebound
⚡️ NIO: Volume Ramps
🛠️ GitLab: CFO Exit
🏥 HealthEquity: Record Margins
📝 Asana: AI Studio Momentum
🤖 UiPath: Execution Improves
🧠 C3.ai: Reset Underway
Broadcom’s Q3 revenue (July quarter) rose 22% Y/Y to $16.0 billion ($0.1 billion beat), and non-GAAP EPS was $1.69 ($0.03 beat).
The AI outlook got a major upgrade. AI-related revenue surged 63% Y/Y to $5.2 billion, beating estimates. More importantly, guidance for AI semiconductor revenue in Q4 is $6.2 billion, well ahead of the ~$5.8 billion consensus. Broadcom’s Q4 revenue guidance of $17.4 billion sailed past the ~$17.0 billion consensus. The biggest news came from CEO Hock Tan, who revealed a new major AI customer (reportedly OpenAI) with over $10 billion in orders, promising a "significant" acceleration in AI revenue for FY26.
Broadcom's efficiency remains best-in-class with a 37% operating margin and 44% of revenue converted into free cash flow, generating $7.0 billion in the quarter.
The VMware acquisition continues to deliver scale. Infrastructure software contributed $6.8 billion, accounting for over 42% of total revenue. This massive and stable software segment provides diversification and predictable cash flow, complementing the semiconductor business.
The narrative has shifted from steady delivery to significant acceleration. By securing a new, multi-billion-dollar AI customer, Broadcom reinforced its position as a critical enabler of AI infrastructure alongside NVIDIA. The stock has doubled in the past year, showing that the market sees a clear path for supercharged growth ahead.
Zscaler’s Q4 revenue (July quarter) rose 21% Y/Y to $719 million ($12 million beat), and non-GAAP EPS was $0.89 ($0.09 beat).
Calculated billings saw a rapid acceleration from 25% Y/Y in Q3 to 32% Y/Y, and ARR grew 22% Y/Y to $3.0 billion. Management highlighted a record quarterly operating margin as Zero Trust and AI security demand stayed strong.
For FY26, Zscaler guided for accelerating revenue growth of 22% Y/Y to ~$3.27 billion (above the $3.2 billion consensus) and non-GAAP EPS to ~$3.66 (in line). The company also introduced ARR guidance of 22% Y/Y to $3.69 billion. AI Guardrails and broader AI security offerings are gaining traction, and the Red Canary acquisition (completed in August) expands MDR capabilities. Product momentum remains solid, supporting high growth and improving margins.
Figma’s first post-IPO quarter showed healthy execution, but the stock collapsed by more than 20%, so let’s review why.
2025-09-05 20:03:41
Welcome to the Free edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
After a landmark antitrust trial that threatened to reshape Silicon Valley, a federal judge rejected the most drastic of the government’s proposals, which was a forced sale of Chrome or possibly Android.
But the sigh of relief wasn't just felt in Mountain View. Apple also had reason to celebrate, as the judge declined to ban the estimated $20+ billion in annual payments it receives to keep Google as the default search engine on Safari.
The verdict's real surprise? The judge pointed to the rise of AI competitors such as ChatGPT as a key reason why drastic measures weren't needed—for now. This created a great irony: the very existence of a new threat to Google's dominance was used as the primary legal justification for not punishing its past monopolistic behavior.
Today at a glance:
⚖️ Google's Judgment Day
☁️ Salesforce's AI Story: Hype vs. Reality
Federal Judge Amit Mehta ruled that Google did break antitrust law, but he didn’t swing the breakup hammer. Instead of corporate surgery, he prescribed a series of targeted changes.
It was less about dethroning Google and more about preventing it from locking the gates to its kingdom.
No more golden handcuffs: Google can no longer sign exclusive deals that make it the only default search engine. Think of this as the "you can't pay to keep everyone else out" rule. They can still pay partners like Mozilla to be the preferred default, but those partners are now free to promote rivals.
Sharing search data: This is the big one. Alphabet must share some user search and interaction data with rivals. The goal isn't to give away the secret sauce, but to provide competitors with the raw ingredients they need to train their own AI models and refine their products. It’s a major step toward leveling the playing field.
The most significant news was what didn't happen. For shareholders, no news was good news.
No breakup: The doomsday scenario—selling off Chrome or parts of Android—is officially off the table. This was the market's biggest fear, and its removal sent a wave of relief through Alphabet’s stock.
The power of default remains: The court did not order "choice screens," which would force phones to ask users "Which search engine do you want?" upon setup. This is a massive win for Alphabet, as some experts during the trial suggested ~90% of users stick with the default.
Then came the ruling on Traffic Acquisition Costs (TAC)—the mountain of cash Alphabet pays Apple ($20+ billion a year!) to be the default search on Safari.
The payments can continue. While the court put some new guardrails in place, the core of this critical partnership remains intact. This deal is the single most important distribution channel for the search giant, and keeping it preserves the company's search moat. The news is also significant for Apple's high-margin Services revenue, of which the Alphabet payment represents ~20%. So it’s no surprise that both GOOG and AAPL surged on the news.
TAC is part of Alphabet’s cost of revenues and reached $14.7 billion in Q2 alone, as visualized in our latest earnings review.
This saga isn't over.
Appeals are coming: Expect both sides to appeal this ruling, a process that could end up at the Supreme Court. While the data-sharing order may set a powerful new precedent for future antitrust cases against Apple and Meta, the judge's strong reluctance to break up Alphabet signals that this option is likely off the table for other tech giants.
The other lawsuit: Don't forget, Alphabet is still facing a completely separate antitrust case focused on its ad-tech business. That trial is another beast entirely, and divestitures are still very much on the table there.
The bottom line: Alphabet won a major battle by avoiding a breakup, but the regulatory war on Big Tech is far from over, and AI challengers are waiting to rush in.
Salesforce (CRM) just posted another solid quarter, with expanding margins across the board. But beneath the surface, a crucial question looms:
Can AI re-accelerate revenue growth and defend the moat?
Let's break it down.
Current RPO (next-12-month backlog) grew 11% Y/Y to $29.4 billion.
Revenue rose 10% Y/Y to $10.2 billion ($100 million beat).
Operating profit: $2.3 billion at 23% margin (+4pp Y/Y).
Non-GAAP EPS: $2.91 ($0.13 beat).
FY26 Guidance (mid-range): +9% Y/Y to $41.2 billion ($50 million raise).
Capital returns: Buyback authorization was lifted by $20 billion to $50 billion.
The July quarter cleared expectations on revenue, margins, backlog, and EPS. But it wasn’t quite enough to impress the market, with a mostly unchanged FY26 outlook, and the cRPO cadence didn’t scream re-acceleration. Analysts wanted a cleaner inflection in new business.
Salesforce’s operating margin has greatly improved in recent years, but it has come at a cost, with revenue growth dropping to only 9% Y/Y in the latest fiscal year.
While Platform (including Slack) and Integration & Analytics (MuleSoft, Tableau) remain the fastest-growing segments, the more mature clouds have slowed to single-digit growth.
📈 Sales: $2.3 billion (+9% Y/Y).
💜 Service: $2.5 billion (+9% Y/Y).
🧩 Platform & Other: $2.1 billion (+17% Y/Y).
🛍️ Marketing & Commerce: $1.4 billion (+4% Y/Y).
🔗 Integration & Analytics: $1.5 billion (+13% Y/Y).
The Data and AI tailwind is real, but pacing and scale matter:
Data Cloud and AI ARR reached over $1.2 billion, up 120% Y/Y (no slowdown). It was up from “over $1 billion” in Q1 FY26.
Agentforce has reached over 12,500 total deals (up from 8,000 in Q1), of which over 6,000 are paid since launch (up from 4,000 in Q1), with strong pilot-to-production trends.
There was no fresh Agentforce ARR update beyond May’s ~$100 million figure, and management said adoption in large, regulated industries takes time. This is the crux of the debate. Customer adoption is accelerating, but the impact on paid contracts has been slower to materialize.
Management signaled deeper moves into the public sector as well as IT service management, which would bring more head-to-head competition with ServiceNow (NOW), something to monitor into 2026.
While Data Cloud and AI are growing fast, the $1.2 billion ARR figure is only 3% of Salesforce’s projected FY26 revenue.
SaaS defensibility in the agent era: Bears argue AI agents could compress per-seat SaaS over time. Management pushed back directly, explaining that customer workflows still live inside CRM, and AI is being embedded rather than replacing the suite.
The upcoming Dreamforce conference will be a key catalyst to get more insights on Agentforce (monetization, attach rates, and concrete customer wins). The company needs to prove that its new AI tools are not just features, but essential drivers that can re-accelerate growth across its entire portfolio.
With the blockbuster $8 billion acquisition of Informatica set to close later this year, Salesforce is making its biggest bet yet on helping customers consolidate messy data pipelines—a key bottleneck for AI adoption.
The big question at Dreamforce will be whether the AI story is compelling enough to convince customers to spend more. Without a stronger bookings uptick, AI won’t yet read as a significant top-line accelerant. For now, Salesforce’s story is one of rising profits and cash flow as AI builds its revenue runway.
That’s it for today!
Stay healthy and invest on.
Disclosure: I own AAPL, CRM, GOOG, META, and NOW in App Economy Portfolio, our investing service, where we identify and accumulate shares of exceptional companies—from fast-growing disruptors to proven cash machines.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or the views of any other organization.
2025-09-02 20:02:58
Welcome to the Premium edition of How They Make Money.
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🔥 The August report is here, with over 100 businesses visualized!
All the key earnings from the past month in one report.
✔️ Cut through the noise with clear, concise financial snapshots.
✔️ See revenue trends, profit margins, and key takeaways instantly.
Download the full report below or log in to your account.
Here’s a sneak peek. 👀
![Screen Recording 2025-08-29 at 12.15.36 PM.mov [video-to-gif output image]](https://substackcdn.com/image/fetch/%24s_!KFvi!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F527d9d82-1965-4e6a-9c28-2825d4676b14_800x450.gif "Screen Recording 2025-08-29 at 12.15.36 PM.mov [video-to-gif output image]")
FROM OUR PARTNERS
They’re a private company, but Pacaso just reserved the Nasdaq ticker “$PCSO.”
Created a former Zillow exec who sold his first venture for $120M, Pacaso brings co-ownership to the $1.3T vacation home industry.
They’ve generated $1B+ worth of luxury home transactions and associated service fees across 2,000+ owners. That’s good for more than $110M in gross profits to date, including 41% YoY growth last year alone.
No surprise the same firms that backed Uber and Venmo already invested in Pacaso. But you don’t have to be a Wall Street firm to invest. Pacaso is giving the same opportunity to everyday investors, and 10,000+ people have already joined them.
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Invest in Pacaso before the opportunity ends September 18.
This is a paid advertisement for Pacaso’s Regulation A offering. Please read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals.
What to expect in our monthly report?
🚗 Automotive: Ferrari.
🪙 Crypto: Circle, Bullish.
📢 CRM: HubSpot, Veeva.
☁️ Hyperscalers: CorWeave.
👟 Apparel: Amer Sports, On.
👔 Buffett: Berkshire, Chevron, Oxy.
⚙️ Chip design: AMD, ARM, NVIDIA.
🏈 Sports betting: DraftKings, Flutter.
🏍️ Gig economy: Lyft, Instacart, Uber.
💬 Social: Match Group, Pinterest, Reddit.
📢 Advertising: Applovin, The Trade Desk.
📦 Commerce software: Global-e, Shopify.
📱 Subscription: Duolingo, Peloton, The NYT.
🌐 Networks: Arista, Cisco, Nutanix, Palo Alto.
✈️ Travel: Airbnb, Expedia, Marriott, Tripadvisor.
💊 Pharma: Amgen, Eli Lilly, Pfizer, Novo Nordisk.
💻 Hardware: Dell, HP, Lenovo, Samsung, Xiaomi.
🛒 Retail: Walmart, Home Depot, Target, Best Buy.
🔬 Semis: Applied Materials, Analog Devices, Marvell.
🌯 Franchises: McDonald’s, Yum!, Restaurant Brands.
📊 Data: Datadog, Elastic, MongoDB, Palantir, Snowflake.
🎮 Gaming: NetEase, Nintendo, Sony, Take-Two, Tencent.
🛍️ E-commerce: Alibaba, Coupang, MercadoLibre, PDD, Sea.
🔒 Security: CrowdStrike, Dynatrace, Fortinet, Okta, SentinelOne.
🍿 Entertainment: AMC, Disney, Live Nation, Paramount, Roku, Warner.
💳 Payments: Affirm, Block, Chime, Dlocal, Global Payments, Nu, Toast.
☁️ Enterprise Software: Atlassian, Autodesk, Axon, C3.ai, Digital Ocean, Docebo, Intuit, Klaviyo, Monday, Paycom, Procore, Twilio, Semrush, Workday, Zoom.
And more, like Hims & Hers, Tempus, Warby, Celsius, Zillow, …